PARIS (AP) — The International Monetary Fund says France’s rigid labor market, high taxes and inefficient public spending are continuing to drag down its economy.

In an annual assessment of France’s economy released Monday, the IMF said the country has made considerable progress in cutting spending, predicting that the deficit will drop to 3.9 percent of GDP in 2013, down from 4.8 percent in 2012.

But the report warned that France needed to accelerate reforms in its labor markets. The country’s rigid employment contracts make firing expensive and complex.

The report also said French taxes — already among the highest in the world — were sapping its ability to compete with its European neighbors, and said the country should instead streamline public spending in social security and at the local level.